Fees charged for medical reports in cases where people say they have suffered whiplash injuries are to be dramatically reduced in the latest move to combat fraudulent claims and tackle the country's "compensation culture".
From October, new rules will mean medical professionals can only charge £180 for an initial whiplash report, reflecting the time taken to carry out assessments and write them up, Justice Secretary Chris Grayling announced.
Currently, prices of up to £700 are charged, meaning that the cost for a medical report in some cases will be slashed to around one quarter of what it is now.
Around half a million whiplash claims take place each year and insurers estimate they add £90 a year to the average motor insurance policy.
The new measures follow Government reforms to the laws around "no win no fee" deals. Lawyers can no longer double their fees if they win, at the expense of defendants and their insurers. "Referral fees" paid between lawyers, insurers, claims firms and others for profitable claims have also been banned.
The Government said the new measures come as further changes to "tackle the compensation culture" are progressing through Parliament in the Criminal Justice and Courts Bill.
These include plans to ban law firms from offering incentives to potential clients and allowing the courts to throw out any compensation case where part of the claim has been proved to be fundamentally dishonest, to prevent people who have had an accident from exploiting the system by making bogus claims or grossly exaggerating the extent of their injuries.
Other new rules in the pipeline include stopping experts who produce medical reports from also offering treatment to the injured claimant, to ensure there is no incentive for them to encourage unnecessary treatment and d iscouraging insurers from settling whiplash claims without a medical report confirming the claimant's injury.
In the past insurers have settled claims without evidence in order to deal with them quickly, meaning some questionable claims are not challenged, the Government said.
It added that work is also ongoing on the next phase of reform to introduce accreditation for experts who provide whiplash reports and to establish greater independence in the market, as in the past there have been questions over the impartiality of medical experts, claims firms and others involved in producing reports.
According to the the latest motor insurance index from AA Insurance, premiums have plunged by £120 or 19.3% typically over the last year, marking the largest 12-month decrease since the AA index started 20 years ago. Premiums now stand at £504.29 on average for someone who shops around for comprehensive annual cover.
But the AA has also warned this could be the "last hurrah" for cheaper premiums as the number of claims remains "stubbornly high", leaving insurers to dig into their reserves to maintain their competitive edge.
Last month, insurer Aviva suggested that car crash victims with minor whiplash injuries should receive medical care rather than cash, estimating that the move would wipe around £32 off the typical motor insurance premium and said it would also act as a strong deterrent to "crash for cash" scams, which are based around fraudsters making money by staging a motor accident in order to make false whiplash claims.
Mr Grayling said: "Honest drivers have been bearing the cost of a system that has been open to abuse and it is time for a change.
"We are determined to have an improved, robust system for medical evidence - so genuine claims can still be settled but fraud is driven out of the market."
James Dalton, Head of Motor and Liability at the Association of British Insurers (ABI), said: "This is welcome news. The cost to honest motorists of exaggerated and fraudulent whiplash claims still remains too high so any move to reduce the 'have a go compensation culture' is supported by insurers.
"We look forward to working with the Government and others to develop a more robust framework, with independent, accredited and peer-reviewed medical experts. This is absolutely fundamental to cleaning up the personal injury sector as it simply can't be right a medical expert is paid by a lawyer who has a financial interest in the clinical finding."